E8-12 (Algo) Preparing Production, Direct Materials Purchases Budgets [LO 8-3b, c] Croy Incorporated has the following projected sales for the next five months: Month April May June July August Sales in Units 3,400 3,815 4,620 4,125 3,950 Croy's finished goods inventory policy is to have 50 percent of the next month's sales on hand at the end of each month. Direct materials cost $3.30 per pound, and each unit requires 2 pounds. Direct materials inventory policy is to have 50 percent of the next month's production needs on hand at the end of each month. Direct materials on hand at March 31 totaled 3,608 pounds. Required: 1. Determine budgeted production for April, May, and June. 2. Determine budgeted cost of direct materials purchased for April and May.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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